iPhone Termination Fee Making Lawmakers Upset

Apple’s iPhone has enjoyed favorable reviews since its recent debut, but it got some criticism on Capitol Hill in Washington this week.

The phones, which cost between $500 and $600—are usable only on AT&T Inc.’s wireless network and will remain that way until 2012. Even though the phones become expensive paperweights if customers quit AT&T’s wireless plan, the company will still charge a $175 early termination fee, said Rep. Edward J. Markey, D-Mass., chairman of a House subcommittee on telecommunications and the Internet.
Markey described the phone as a “Hotel California service. You can check out any time you like, but you can never leave—you’re stuck with your iPhone and you can’t take it anywhere.”

Timothy Wu, a law professor at Columbia University and commentator on technology issues, described the cell phone industry as “spectrum-based oligopoly” where customers have given up their property rights.

“Imagine buying a television that stopped working if you decided to switch to satellite,” Wu said. “Or a toaster that died if you switched from Potomac Power to ConEd.”